Inside Asian Gaming

INSIDE ASIAN GAMING | April 2010 Market Outlook gives a passing impression of a cash and credit-fuelled bubble—mirroring what’s happening in China’s wider economy. Many analysts may have been put off extrapolating annual growth estimates for Macau based on first quarter GGR performance by the recent excitement, and to some extent confusion, caused by an announcement by Francis Tam, Macau’s Secretary for Economy and Finance. According to media stories in late March, Mr Tam was reported as saying a maximum of 500 new tables would be allowed in the Macau market between now and 2013. Such regulatory hiccups notwithstanding, CLSA Asia-Pacific Markets, an independent brokerage and investment group, has been prepared to put some bullish cards on the Macau gaming table regarding 2010 growth. Admittedly, CLSA’s latest report on the Macau gamingmarket by Aaron Fischer and Huei Suen Ng, titled ‘Charging ahead’, was published on 23rd March, shortly before Mr Tam’s announcement. Nonetheless, CLSA’s forecast of 30% growth year-on-year for 2010 hardly seems radical, given the current growth trajectory of Macau in the first quarter. “With such a strong start to the year, our implied growth for the rest of the year appears too light. As a result, we have lifted our top line gaming revenue forecast from 17% to 30% for full year 2010,” states the CLSA report. “We have revised our gaming revenue forecasts for Macau to MOP155 million (US$19billion) for the full year 2010, implying 30% yoy [year-on-year] growth,” the report continues. “The first three months is expected to register above expectations growth at 61% yoy. As a result, our earnings and target prices for Sands China, Wynn, SJM andMelco Crown have been revised upwards,”adds the research paper. “Unless there is some shocking contraction in the second half caused by a severe credit tightening in China or unforeseen events that greatly restricts travel, we expect our forecasts to be met,” states the CLSA report. CLSA also points out that in January and February, visitor arrivals increased by 15% year-on-year, “a sharp rebound” from a decline of 5% in the equivalent period last year. It adds that the number of tourists from mainland China grew by 28% in the first two months of 2010. In February, the month of this year’s Chinese New Year holiday, the number of mainland tourists grew 38% year on year. “There had been concerns on tightening of visas with recent explosive growth in gaming revenues. As a reminder, the Chinese and Macau governments intervened when gaming-revenue growth hit 60% in 2008,” says CLSA in its report. Monthly gaming revenue growth 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% Monthly gaming reverues (MOPm) YoY growth % Source: CLSA Asia-Pacific Markets Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Galaxy Macau